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Nyamen Sedap Lazat's avatar

Just tacking back to this article as SEIT appears to be at a 12m low today

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The Oak Bloke's avatar

Yes it hasn’t gone unnoticed! New SEIT article is in draft!

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Philip Grayson's avatar

inexplicable discount makes this a compelling investment case.

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Waits's avatar

Very good summary about the trading update. Thanks!

The key now for SEIT is to see the sale of Onyx through and the final price. That is the near term catalyst for the price and for the dividend to be sustained...let's see, if they indeed finish the sale before the Full Results.

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Simon's avatar

Wanting to sell ONYX at this point when according to the update and your analysis it's firing on your cylinders doesn't make sense to me, except when they are looking around hard for cash.

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The Oak Bloke's avatar

I would not characterise the situation as they are “looking around hard” (for cash)

They give the rationale as:

The RCF is short-term debt

The mandate is not to keep that as high as its last reported 35% gearing to EV

They want to demonstrate the value of the NAV

So SEIT is planning one of two routes:

“the RCF has been drawn to fund investments at Onyx and EVN until completion of the co-investment/disposal processes and/or project-level financing that will be used to reduce its balance.”

i.e. they tell us that:

“Processes are underway to introduce or increase project-level financing at Onyx, EVN and Oliva. Through the use of such gearing, we have a clear path to reduce the SEEIT RCF to £100-150 million by the second half of 2025, even without a disposal. With a disposal, this would be significantly accelerated”

They also tell us the underlying reason to sell:

“While these processes are not the only way to reduce the RCF, they have the additional benefit of validating our valuations, and therefore underpinning the NAV of the portfolio.”

OB

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Simon's avatar

Ok, I see. Thanks for clarifying!

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Philip Grayson's avatar

Dear OB, and fellow followers of SEIT. I see that Li-Cycle has entered bankruptcy in both Canada and USA. I'm aware that they were intending to be a participant in the Rochester Hub. Does anyone know whether/how big an impact this might have on the overall Rochester business case? Is it just a missed opportunity of additional revenue in SEIT, or are there more fundamental capital implications here?

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The Oak Bloke's avatar

Dear Philip,

Li-Cycle are a customer of SEIT at its Red Rochester site. SEIT's holding supplies energy to various customers in the industrial park.

According to Li-cycle's records they paused Construction in October 2023.

(See https://s27.q4cdn.com/432858399/files/doc_financials/2023/ar/LICY-2024-AGM-Annual-Report-on-Form-10K.pdf)

Therefore the impact is zero or at worst highly marginal in 2025 since it is unlikely any energy was being consumed by a paused construction project (or minimal).

The "stalking horse" bid by Glencore might prove to a positive from this news and we must await news on that.

The scale of Glencore should unlock the project (not so good for Li Cycle shareholders of course) and accelerate its build. After all the project qualifies for support under the Trump Critical Minerals Act (Lithium is one of 31 metals) - see https://www.congress.gov/crs-product/R47982

But also qualifies for substantial tax credits and support under the IRA (see

https://www.energypolicy.columbia.edu/publications/the-ira-and-the-us-battery-supply-chain-one-year-on/)

Not long to wait for an update on SEIT.

OB

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Philip Grayson's avatar

Many thanks OB. The reason I'm puzzled is that SEIT's management thought the likely go-ahead of this project sufficiently noteworthy to mention it in their 31/3/25 Trading Update to the market: "The team is also focused on... and continue to work closely with Li-Cycle, a customer for RED-Rochester that is expected to significantly increase its energy requirements with the construction of a new hub processing centre. Whilst this centre has experienced some challenges and delays, Li-Cycle has secured a fully committed loan from the Department of Energy."

I’m struggling to see how this could be sufficiently important to warrant such comment when it’s expected to go ahead, but is not significant when the counterparty has failed. Could this imperil dividend payment plans/cover?

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Craig's avatar

I've started to take a look at this one. But Onyx worries me. I'm nursing heavy losses from Ecofin Renewables having to sell its US distributed solar portfolio at a huge discount to NAV in order to repay its RCF. Looks too similar to me. Value from capital-intensive growth often disappears once you take away the capital and you simply look at steady-state IRRs.

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teamwork86's avatar

Just saw today's update from Greencoat UK wind. The quote that stood out for me was "The decrease in NAV was driven by lower power price forecasts, which reduced NAV by 2.4p per share, and mark-to-market movements on interest rate swaps, which shaved off 0.6p per share. "

It seems that all the renewable energy firms are still predicting lower power prices

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